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Mansion tax would require expensive revaluation
The Lib Dem proposal to introduce a mansion tax targeting wealthy homeowners would require a revaluation of property values costing potentially hundreds of millions of pounds, the Chancellor is being told.
It would also be wide open to legal challenges from homeowners who dispute how much their properties are worth, Tory sources claim.
Scrapping the 50p top rate of tax is not worthwhile if it means bowing to Liberal Democrat demands for a mansion tax in exchange, Tory Cabinet ministers are warning George Osborne.
Mr Osborne is said to be more open to new property taxes than David Cameron, who is reported to have a ‘deep-seated scepticism’ about the idea.
Lib Dem Business Secretary Vince Cable yesterday went public with demands for a new mansion tax to hit the better-off in return for agreeing to the abolition of the 50p top rate of tax, currently levied on income over £150,000.
Senior Tories are increasingly concerned that the supertax on income is driving away the wealthy and losing the Treasury more in revenue than it gains. But abolishing a levy that affects only the highest-earning 320,000 in Britain at a time of austerity for all is fraught with political danger.
Mr Cable said there was an agreement within the Coalition that if the 50p rate was scrapped, it would be replaced with a levy on wealth, such as the mansion tax, probably on the estimated 80,000 homes worth £2million or more.
‘There is a broad understanding... that if the 50p rate were to go – and I and my colleagues are not ideologically wedded to the 50p tax rate – it should be replaced by taxation of wealth because the wealthy people of the country have got to pay their share, particularly at a time of economic difficulty,’ he said.
‘How exactly that is configured is a detailed matter for negotiation but that principle must be upheld. Mansion tax actually is a very economically sensible way of doing it, but there are different ways of approaching it.’
The current system of taxes on property ‘doesn’t work’, Mr Cable claimed, adding: ‘There are vast numbers of extraordinarily valuable properties now around in the south of England netting very large gains for their owners – many of whom come from abroad incidentally – and it’s not taxed at all.
‘You get people with multi-million-pound properties paying exactly the same council tax as someone in a semi.’
Mr Cable has long championed the idea of a mansion tax with a charge of 1 per cent of a property’s value over £2million, probably levied annually.
Alternatively, two new council tax bands could be introduced – one for for homes worth between £1.5million and £2million; and one for homes worth £2million and above – though this would mean the extra revenue going to local authorities.
One Tory source said: ‘New council tax bands or property levies cannot be created without some form of revaluation. New local property taxes will hit ordinary families and pensioners who have worked hard and paid their taxes.
‘It will include those with large mortgages who are not otherwise capital-rich, pensioners now on modest incomes living in their long-standing family home, and professionals who live in large shared houses in London. Detached homes would be hit the hardest.’
Tory MP David Ruffley, a member of the Treasury select committee, cautioned against a mansion tax, saying: ‘Why many Conservatives are a bit wary of this is that it could very quickly morph into a much bigger proposition on wealth taxes.’
Liberal Democrat peer Lord Newby, who has drawn up detailed proposals for a mansion tax, said: ‘In the medium term, we want to reduce the 50p rate back down to 40p.
‘But when we do it, we need a countervailing measure to ensure that those who have high amounts of wealth pay their fair share.
‘If you take someone like Roman Abramovich, the amount of rates he pays on a property in Kensington and Chelsea works out at 42 quid a week. He is an extraordinarily wealthy man. I don’t believe that people like him are paying their fair share and I think this is the easiest way to make sure they do.’
Source: Mail on-line
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